Investing in Global Smaller Companies Through ETFs

Small cap passive funds have the potential to boost long-term returns and they can play a key role in an investor’s portfolio

Dimitar Boyadzhiev 18 September, 2018 | 12:18PM
Facebook Twitter LinkedIn

target bulls-eye investing in smaller companies can deliver better returns although performance can be volatile

Global small cap stocks have outperformed their mid- and large-cap counterparts by 2.5% per year on average over the last decade.  While returns have been impressive, they have been accompanied by higher levels of risk with small caps registering almost 15% higher standard deviation over the same period.

History teaches us that global small cap investors willing to hold their nerve through the choppier moments will be rewarded. Looking back over the last two decades, a period which includes the dot com crash and financial crisis of 2008 we can see that the chances of outperformance increased with the holding period. This suggests that small cap growth potential is best realised over longer time horizons.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
iShares MSCI World Small Cap ETF USD Acc7.43 USD0.28Rating
SPDR® MSCI World Small Cap ETF106.15 USD0.35Rating
Vanguard Glb Small-Cp Idx £ Acc403.78 GBP0.28Rating

About Author

Dimitar Boyadzhiev  is a Passive Strategies Research Analyst for Morningstar

© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies       Modern Slavery Statement